US-based French fries manufacturer Lamb Weston has recently appointed a new CEO, shortly after being urged to revamp its leadership team by an activist investor.
The Idaho-based public company announced that its current COO, Michael Smith, will assume the roles of CEO and president on January 3rd. He succeeds Thomas Werner, who is stepping down as CEO and board member, though he will continue with the company in an advisory capacity until next August.
On December 16, activist investor Jana Partners, having acquired a 5% stake in Lamb Weston for $336 million in October, expressed dissatisfaction with the company’s performance. They claimed to have received no communication from management regarding their recent call for a review of “strategic alternatives.”
In a letter issued on Monday, Jana Partners indicated they hoped the executive team would address their concerns during today’s announcement of the second-quarter results. They reiterated that significant changes in leadership and board structure are essential. In the absence of these changes, they propose that the company conduct a formal review of strategic options, potentially including a sale.
Additionally, Lamb Weston’s peer in the food sector, Post Holdings, is reportedly interested in acquiring the frozen potato products supplier.
During the announcement regarding the CEO change, Lamb Weston characterized Smith as a “key leader who has driven robust growth across multiple areas of the company” since joining in 2007.
According to company chairman W.G. Jurgensen, this appointment has been part of a long-planned strategy.
“Mike’s appointment represents the culmination of a thoughtful, years-long succession planning process by our board, and we are confident he is the right leader to guide Lamb Weston forward,” he said.
“Mike has developed a deep understanding of all critical aspects of our business and commercial operations. He will also bring a fresh perspective to the role, along with a blend of strategic thinking and a laser focus on capturing current market and operational opportunities, as well as a deep appreciation for our employees, customers, and partners.”
Smith expressed his enthusiasm about the future, stating, “I am excited about the opportunities ahead for our company and believe that our unwavering focus on customer satisfaction, operational excellence, and continued innovation will enable us to enhance value for our shareholders.”
Meanwhile, the company has adjusted its annual net sales forecast, reducing it from the previous range of $6.6 billion to $6.8 billion to a new range of $6.35 billion to $6.45 billion. This decision reflects the intensified competitive environment impacting pricing and volume in its international segment, alongside incremental volume pressure in North America and its financial performance during the second quarter.
At the same time, the company revised its guidance on EBITDA, EPS, and net income. Adjusted EBITDA is now expected to fall between $1.17 billion and $1.21 billion, down from approximately $1.38 billion previously. Additionally, net income is projected at $330 to $350 million, compared to earlier forecasts of $395 to $445 million.
Diluted EPS is now anticipated to range from $2.30 to $2.45, a decrease from the previous expectation of $2.70 to $3.15.
The Q2 financial results, which were released today, revealed net sales of $1.60 billion, marking an 8% year-over-year decline. Adjusted EBITDA also decreased by 25%, totaling $281.9 million.
Lamb Weston previously lowered its net income and EPS forecasts during the first-quarter results announcement in October, coinciding with the closure of its facility in Connell, Washington, and significant job reductions as part of a cost-savings initiative.
